The Nickel Report

Legalization of medicinal and adult-use cannabis in California has fomented a surge of seed-to-sale companies angling to lure market share from a sea of customers. The water may soon be agitated, however, by the Office of Environmental Health Hazard Assessment (OEHHA). OEHHA is the lead California agency that oversees implementation of Proposition 65, formally known as the Safe Drinking Water and Toxic Enforcement Act of 1986. OEHHA recently announced that it has selected cannabis (marijuana), marijuana (cannabis) smoke, cannabis extracts, and delta-9-Tetrahydrocannabinol (THC) for review for possible listing under Proposition 65 as chemicals that cause reproductive toxicity. If the Developmental and Reproductive Toxicant Identification Committee (DARTIC) determines that these chemicals cause reproductive toxicity based upon “scientifically valid testing according to generally accepted principles,” marijuana in its various forms will likely join a list of more than 900 chemicals known to the state to cause cancer, birth defects, or other reproductive harm. Companies that cultivate, distribute, and/or sell marijuana and products containing marijuana in California would then be required to warn consumers—and possibly employees and passersby—that exposure to these listed chemicals can cause reproductive harm.

While coming from opposite ends of the political spectrum, the administrations of US President Donald Trump and Mexico’s recently elected chief executive, Andrés Manuel López Obrador (commonly referred to as “AMLO”), have each heralded significant policy shifts with potential to affect bilateral relations as well as international energy markets.

EPA has shown a little love for states wanting action on per- and polyfluoroalkyl substances (PFAS). On February 14, 2019, EPA announced its PFAS Action Plan, calling it “the most comprehensive, cross- agency action plan for a chemical of concern ever undertaken by the Agency.” The Action Plan consists of 23 priority action items with the majority identified as short-term or generally taking place or expected to be completed in the next two years.

An interesting confluence of issues may facilitate the creation of an improved regulatory framework for the beneficial use of produced water from oil and gas operations. Water supply and produced water management have the attention of many oil and gas companies for a variety of reasons. Concern over water supply and severe drought has lead a number of states and municipalities to look for sources of water outside the traditional sources of groundwater and surface water. At the same time, environmental groups are concerned over drought impacts to surface water and wildlife. Given the abundance of produced water in some formations, it may be possible to reuse produced water within oil and gas operations and beneficially use produced water outside of oil and gas operations. What are the issues surrounding produced water and how are they impacting the development of regulatory programs governing the use of produced water?

Last week, the US Environmental Protection Agency (EPA) released its annual enforcement results for the 2018 fiscal year (ranging from October 1, 2017, to September 30, 2018). The report, prepared by EPA’s Office of Enforcement and Compliance Assurance (OECA), highlights the results of the agency’s civil and criminal enforcement of the nation’s federal environmental laws over the past year. The 2018 results mark the first full fiscal year of enforcement results, including inspections and compliance evaluations, under the Trump administration. A statement in the report from Susan Bodine, the Assistant Administrator for OECA, summarizes EPA’s enforcement priorities, explaining, “[i]n fiscal year 2018, we continued our focus on expediting site cleanup, deterring noncompliance, and returning facilities to compliance with the law, while respecting the cooperative federalism structure of our nation’s environmental laws.”

On Wednesday, February 7, Congressman Alexandria Ocasio-Cortez (D-NY) introduced a federal resolution to recognize a “duty” of the federal government to create a Green New Deal (GND). This blog discussed the GND in a post on the Select Committee on the Climate Crisis on January 31.

Addressing climate change may be a primary focus of the resolution, but “green” is perhaps a misnomer, as the resolution calls for action on issues well beyond climate or the environment generally.

Energy companies may not be thinking much yet about federal legislation to regulate the consumer data they hold, but they should be. Privacy is shaping up to be a key legislative topic this year.

Why would an energy company need to care about privacy legislation? Because lots of different energy companies have extensive consumer data. Oil companies’ service station loyalty programs, electric utilities’ customer data—these are among the many types of consumer data that might end up being regulated under legislation Congress is expected to consider. Any company with large amounts of consumer data should pay attention to the issue. In addition, HR data may also be covered by privacy legislation, affecting every US company whether or not they hold consumer data.

“According to FERC, it is now commonplace for states to use Section 401 to hold federal licensing hostage.”

These are the words the DC Circuit used in Hoopa Valley Tribe v. Federal Energy Regulatory Commission, No. 14-1271, p. 10 (D.C. Cir., Jan. 25, 2019), to describe the state of play on § 401 certifications affecting hydroelectric facility licensing or re-licensing applications. CWA § 401(a)(1) requires, as a prerequisite for federal permits for activities that may result in a discharge into the navigable waters, that affected states certify that any such discharge will comply with applicable, enumerated provisions of the Clean Water Act. But, if a state fails or refuses to act on a request for certification within “a reasonable period of time (which shall not exceed one year) after receipt of such request,” the statute deems the certification requirements waived.

Reversing a Texas Court of Appeals decision that allowed Anadarko’s Lloyd’s of London excess insurers to escape coverage for more than $100 million in defense costs incurred in connection with claims from the Deepwater Horizon well blowout, the Supreme Court of Texas held that the insurers’ obligations to pay defense costs under an “energy package” liability policy are not capped by a joint venture coverage limit for “liability” insured.  Anadarko Petroleum Corp. et al. v. Houston Casualty Co. et al., No. 16-1013 (Tex. Jan. 25, 2019).

One of the first orders of business for Speaker of the House Nancy Pelosi (D-CA) was to reinstate the Select Committee on the Climate Crisis. This committee previously existed from 2007-2011 as the House Select Committee on Energy Independence and Global Warming but was not renewed by Republicans when they gained control of the House in the 112th Congress. The new Select Committee will be chaired by Congresswoman Kathy Castor (D-FL).